How Much Does Socioeconomic Status Affect Medical Costs?

Physician profiling for relative costs and utilization is a very important approach to ensuring appropriate use of care resources and creates opportunities to work with physicians to think about their practice patterns.  There are numerous methodological concerns about physician profiling and one is whether the various methods used adequately account  for the socioeconomic status of patients.   (MC Article)   An article in Medical Care reports an analysis on an episode of care basis of claims from physicians in the commercial plans of three Massachusetts health insurers.  The data is from 2004 and 2005 and each patient in the analysis was assigned an SES based on six indicators derived from their zip code.  In general, past research has shown that low SES patients have higher health care costs, generally because they use less preventative care but more hospital services.  Actual reimbursement for services was standardized and episode assignment to a specific physician was done by plurality of costs.  Using zip code based SES obviously lessens the sensitivity of the result.  Resulting patient episodes were divided into 5 quintiles of SES status.  As expected the patient episodes in the lowest quintile reflected about $80 or 15% average higher costs than those in the highest SES in an unadjusted analysis.  When adjusted for various factors, such as case mix, however, SES became an insignificant factor in explaining variation among physicians.  The greatest factor, accounting for almost 70% of variation, was case mix.  Variation between physicians explained a smaller proportion of variation.  So concerns that in physician profiling doctors with a high number of low SES patients will be disadvantaged appear to be unfounded and at least based on this research, there would appear to be little value in adding SES to such profiling efforts..